Working capital

Working capital is characterized by a short service life and a price that is immediately attributed to production costs (purchase of materials, raw materials, products intended for sale, components, semi-finished products). As a definition, this concept means the value expression of various objects of labor, which turn around in the production process only once. At the same time, they transfer their entire price to the output produced, that is, they create its cost price.

Working capital is the same working capital that the organization uses to carry out its own production activities. They differ in one feature - they are completely consumed by the enterprise in one interval of the usual production cycle. All working capital consists of:

- production stocks (raw materials, semi-finished products, materials, electricity, fuel, spare parts, components, costs of unfinished production, future costs, finished goods).

- accounts receivable, the term of which is more than 12 months;

- cash in the accounts and in the cash register;

- short-term financial investments;

- other current assets.

There is a certain classification of working capital:

1. Circulating industrial funds, consisting of:

- industrial supplies (basic materials and raw materials, fuel, purchased semi-finished products, low-value and quickly-worn items, auxiliary substances);

- costs of future periods;

- funds that are in production (semi-finished products of its own release).

2. Treatment funds consisting of:

- unrealized products in warehouses;

- shipped, but unpaid products;

- goods intended for resale.

- funds in accounts, in cash and securities.

The main goal of management control is to determine the most optimal size and clear structure of these funds. Also, the sources of their financing should be analyzed. Working capital is divided into:

- permanent - part of current assets, the need for which practically does not change during the production cycle; This minimum amount of current assets is an indispensable condition for the implementation of normal production activities.

- variable capital - an additional current asset necessary for carrying out various unforeseen transactions.

Net working capital is a very important factor that is used in the financial analysis of a company. It characterizes the magnitude of that capital that is free from all short-term obligations. He has another name - working capital. It is necessary for stable maintenance of financial stability of the organization. If current assets exceed the amount of short - term liabilities, this means that the enterprise can easily repay these obligations and has reserves to expand its activities.

Own working capital indicates how much of the current assets the company finances with its own resources. Its availability and size is one of the most important characteristics of the financial stability of an organization. The amount of equity is established as follows: the amount of current liabilities is deducted from the amount of working capital. The lack of this capital leads to a significant decrease in the constant and increase in the variable part of assets. This state of affairs testifies to the growing financial dependence of the organization and its precarious situation. The state of this indicator is reflected in the liquidity ratio, which characterizes the ratio of the value of current assets to the attracted capital.